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Countries Are Now Failing ... Iceland is Essentially Bankrupt
Now I am really worried.
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Iceland Drops Krona Defense; Abandons Bank Purchase (Update1) By Tasneem Brogger and Helga Kristin Einarsdottir Oct. 8 (Bloomberg) -- Iceland scrapped attempts to strengthen the currency and abandoned plans to nationalize the country's third largest bank as the crisis in its banking industry deepened. The central bank ditched a currency peg equivalent to 131 krona per euro after failing to convince investors it could maintain it. The government canceled the purchase of a 75 percent stake in Glitnir Bank hf and handed the lender over to regulators, saying it was in bigger trouble than previously estimated. Iceland's banking system is buckling under the weight of debts equal to 12 times the size of the economy, with financial regulators now in charge of Glitnir and the second largest bank, Landsbanki Islands hf. As the crisis mounts, the central bank has indicated it is powerless to halt the slump in the krona. ``They need to come up with a long-term solution to stabilize their economy,'' said Lars Christensen, a senior strategist at Danske Bank A/S in Copenhagen. ``This isn't something they can do on their own, they need outside help and frankly I can only see them achieving this with the help of the IMF.'' International Monetary Fund spokesman William Murray said yesterday a mission had been sent to Iceland, declining to say how long it has been there or what it was discussing. The Washington- based lender sends missions at the request of host countries. Icelandic Prime Minister Geir Haarde said yesterday the government will open negotiations for a 4 billion-euro ($5.47 billion) loan from Russia. `Hardly Surprising' The central bank said yesterday it would try to fix the trade-weighted krona index at 175, corresponding to 131 against the euro. Nordea Bank AB, the biggest Scandinavian lender, said the price suggested by bid/ask spreads in pre-market trading was 255 per euro, 49 percent below the rate targeted by the bank. The failure to fix the currency ``is hardly surprising,'' Christensen said. The Financial Supervisory Authority took over Glitnir after the government realized that the ``difficulties of the bank were much greater'' than previously estimated, central bank Governor David Oddsson told television broadcaster RUV late yesterday. The government on Oct. 6 announced a bill to protect domestic bank deposits as the credit crisis strangled banks' access to funding. Moody's Investors Service today cut its rating to A1 from Aa1, adding the ratings remained under review, citing the negative impact of the country's banking crisis on the government budget. `Short-Term' ``The attempt of the authorities to effectively `ring-fence' public finances from the fallout of the banking crisis may only provide some needed short-term respite,'' Moody's Vice President Kenneth Orchard said in the statement. ``But some of the banks' external liabilities will eventually filter through to the government's balance sheet.'' Glitnir has started ``restructuring'' its operations and said today it will sell its Finnish and Swedish holdings. The FSA's move means Glitnir is temporarily protected from its debt obligations, the bank said in a statement on its Web site. Chief Executive Officer Larus Welding will continue to head the company through the restructuring process, Glitnir said. Kaupthing Bank hf, Iceland's largest bank, said today it's in talks regarding its ``involvement in the reorganization of Glitnir,'' according to a statement. ``Further talks will be held over the next several days,'' the bank said. U.K. Prime Minister Gordon Brown said today Britain will sue Iceland over deposits belonging to 300,000 U.K. account holders with Landsbanki's Icesave Internet banking unit. `No Money' ``The Icelandic government, believe it or not, have told me yesterday they have no intention of honoring their obligations here,'' Chancellor of the Exchequer Alistair Darling told the British Broadcasting Corp. ``The first call would be on the Icelandic compensation scheme which, as far as I can see, hasn't got any money in it.'' Iceland's FSA will probably declare Icesave insolvent, Darling told parliament today. Landsbanki's Dutch Icesave unit ``can no longer meet obligations,'' according to a statement on its Web site today. The unit canceled transactions conducted since noon Oct. 6. The U.K. Treasury today transferred Kaupthing unit Singer & Friedlander's deposit business to ING Groep NV and put the rest of the business under administration after the unit went into default, the Treasury said in a statement. Iceland's government will ``immediately review'' the matter with a view to finding ``a mutually satisfactory solution,'' the foreign ministry said in a statement distributed by the Iceland stock exchange today. http://www.bloomberg.com/apps/news?...id=auCZ.ljDGCJ0 |
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If you have excess assets sitting in any foreign (e.g. GBP) accounts, now is a good time to get them into a US-based USD account (or maybe a real Swiss account - not UBS or CS). The rationale is simply that the world is now full-on engaged in a sort of financial warfare, whereby countries are engaged in a financial arms race: Ireland guarantees bank deposits, Germany follows suit, Iceland basically on the brink of collapse gets bailed out by a Russian loan, and now basically UK government ownership of banks (how is that NOT communism?). The reason this is financial warfare is because a) each step designed to protect domestic financial interests acts at the EXPENSE of foreign interests, always; and b) other countries must respond in at least like-for-like or else their domestic financial conditions will implode as capital moves away from them. The problem with this financial warfare is that some countries will ultimately break, but more importantly, before they break they will have to use measures of last-resort - i.e. a financial nuke so to speak. That would be capital controls. Capital controls mean the end of globalization and capitalism as we know it, a sort of devolution to pre-war economies right before a global Great Depression that, in my opinion, could be worse than 1929-1933. Why would capital controls be so bad? Two primary reasons: Take an international corporate, for example, that is based in country A (and funds there) but derives a great deal of income from country B. If country B imposes capital controls, the company suddenly can't take the income it's earned and pay its bills and workers, many of which are in country A. That company thus goes bankrupt, screwing not only shareholders but employees as well, the majority of both of whom are in country A. Secondly, country B may benefit in the short-term in this case by preserving capital in its domestic system, but unless country B is truly self-sufficient (clearly not the case as it no longer gets goods from the company that has gone bankrupt, itself a "victim" of globalization), country B will essentially be left on its own to rot until the financial system can bend no more and it can no longer fund itself and has to print money, devalue the currency, and the cycle will be complete - war + inflation. So you have to ask yourself, which countries in this world are the most stable and self-sufficient in an anti-globalization world? The US is certainly one of them. While this does not in the slightest exempt them from the effects of this great contraction, they will hopefully be one of the last guys standing. Anyhow, I'd move all of my discretionary assets into the US in a federally insurred account, and consider buying hard assets (assets that produce something). Also, while it is counterintuitive, do NOT pay down debt now (assuming servicing the interest is easily serviced many times over considering your income/cash stockpile). The end game of all this will be war + inflation. This is scary, scary stuff. I am not saying the above scenario is a certainty, but it is more than just a distinct possibility and the impact of it is so severe it would be foolhardy not to take any precautionary steps to hedge that scenario. Some very good (albeit nerdy) reading material: Bernanke's thesis on the Great Depression (attached) and M Friedman's "The Great Contraction" - these two side-by-side represent the best foremost analysis we have on the subject. ____________________ Global Rates Proprietary Trading Deutsche Bank AG London |
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Timing right for G7 to act on credit crisis: IMF Wed Oct 8, 2008 12:41pm EDT Email | Print | Share| Reprints | Single Page | Recommend (2) [-] Text [+] By Emily Kaiser WASHINGTON (Reuters) - World finance leaders who improvised their way through the first year of the credit crisis may finally be ready to come up with a comprehensive plan to clean up the mess, the IMF's chief economist said on Wednesday. In an interview with Reuters, Olivier Blanchard said policy-makers have had little choice but to react to each new emergency, but the rash of crises in recent weeks finally convinced them it was time for a broader response. A gathering of the Group of Seven finance leaders on Friday, followed by the IMF's weekend meetings, should provide an ideal setting for them to figure out what to do next. "Events focus the mind," Blanchard said. "What's absolutely essential to solve this financial crisis is the perception by the public and by the markets that there is a coherent plan." Six months ago, G7 leaders pledged to implement a series of recommendations to try to right the financial system, such as encouraging banks to disclose losses and raise new capital, but the crisis has worsened considerably since then and the response needs to change, too. European leaders balked at a proposal to send up a bank bailout fund similar to the $700 billion package recently passed in the United States, but the fact that they were discussing a coordinated response was a sign of progress. "We're now getting to the point where all governments understand that it has to be a coherent plan," he said. "From there to actually doing it there are still a few steps, but that realization is now here," Blanchard said. It was probably "too much to ask" that G7 leaders emerge from Friday's meeting with an agreed, specific course of action, but he said he was confident that some progress would be made this weekend and in the coming weeks. Central banks took a giant step on Wednesday when they announced coordinated interest rate reductions. Blanchard said that provided a vital dose of investor confidence, but the markets' mixed reaction showed investors need more proof that world leaders were working together. Until that happens, there may be a few more "difficult days" in the markets, he said. He said in hindsight, it was clear that allowing Lehman Brothers to slide into bankruptcy triggered a far more dangerous bout of financial market turmoil that has now darkened the global economic outlook. He said the U.S. Treasury Department took a gamble that letting Lehman fall would send a clear signal to markets that the government would not always intervene. "It was a bet. It was lost. What happened as a result is all kinds of financial institutions realized that their claims were not as secure as they thought. As a result, this led to an enormous increase in perceived counterparty risk, and then the system froze." "Whether without it (the fall of Lehman) we would have avoided where we are today, I do not know. Some other event might have triggered the same thing a week later." http://www.reuters.com/article/topN...l=10341&sp=true |
I am surprised that Iceland is begging for a 4-billion euro loan from Russia. So now they want Russia's help, eh .... those pesky Russkies have over 500 billion in foreign currency reserves saved up, so go figure.
We'll see, but I still dont understand how this massive money injection can rescue the world from this impending crisis of astronomical proportions.
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| Originally posted by Magnetonium I am surprised that Iceland is begging for a 4-billion euro loan from Russia. So now they want Russia's help, eh .... those pesky Russkies have over 500 billion in foreign currency reserves saved up, so go figure. We'll see, but I still dont understand how this massive money injection can rescue the world from this impending crisis of astronomical proportions. |
We haven't seen a global economic downturn like this since the 1930's.
Don't you think that iceland is a rare case? It's a very small country that produces almost nothing except a few minerals (along with a fishing industry). I wouldn't be any more worried about iceland going bankrupt than i would be about North Dakota going bankrupt (and North Dakota has almost double the GDP). Apparently, Iceland's financial system was poorly managed, and it's economy was too highly leveraged. Perhaps if Iceland actually had some production capabilities it could withstand such a crisis. However, when the economy is built almost entirely on borrowing money, instead of through selling resources or domestically produced goods, the economy is more open to the risks associated with leverage. People seemed to forget that leverage can mulitply losses as well as gains.
http://www.bea.gov/regional/gsp/action.cfm
Pakistan is well on its way as well.
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| Originally posted by jerZ07002 Don't you think that iceland is a rare case? It's a very small country that produces almost nothing except a few minerals (along with a fishing industry). I wouldn't be any more worried about iceland going bankrupt than i would be about North Dakota going bankrupt (and North Dakota has almost double the GDP). Apparently, Iceland's financial system was poorly managed, and it's economy was too highly leveraged. Perhaps if Iceland actually had some production capabilities it could withstand such a crisis. However, when the economy is built almost entirely on borrowing money, instead of through selling resources or domestically produced goods, the economy is more open to the risks associated with leverage. People seemed to forget that leverage can mulitply losses as well as gains. http://www.bea.gov/regional/gsp/action.cfm |
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| Originally posted by occrider There is virtually no short term or long term lending in the commercial paper market right now. Institutional investors and Banks need to start lending to other banks and companies or they will start collapsing. Panic has virtually seized the money markets. A global coordinated response in monetary and fiscal policy sends the message that governments are committed towards the restoration of normal market operations. It's all about eliminating panic. |
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| Originally posted by jerZ07002 Don't you think that iceland is a rare case? It's a very small country that produces almost nothing except a few minerals (along with a fishing industry). I wouldn't be any more worried about iceland going bankrupt than i would be about North Dakota going bankrupt (and North Dakota has almost double the GDP). Apparently, Iceland's financial system was poorly managed, and it's economy was too highly leveraged. Perhaps if Iceland actually had some production capabilities it could withstand such a crisis. However, when the economy is built almost entirely on borrowing money, instead of through selling resources or domestically produced goods, the economy is more open to the risks associated with leverage. People seemed to forget that leverage can mulitply losses as well as gains. http://www.bea.gov/regional/gsp/action.cfm |
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| Originally posted by josh4 Real stuff - scary. It took a world war to drag us out of the great depression. It gets to me thinking about it, I still remember high school and how my counselors and everyone were so happy. The economy was doing so well and you heard stories of kids making all this money and there were plenty of jobs and opportunity... Then Bush got elected. |
Yeah, it's fairly deceitful to claim this wouldn't have happened had Bush not been in office.
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| Originally posted by Shakka The stock market peaked in March 2000, it's hard to say that those are things that Bush created or was somehow responsible for. |
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| Originally posted by josh4 Do you really trust our world leaders to be able to coordinate that kind of effort? I sure don't. |
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Bernanke, Paulson Seek Global Help as Crisis Spreads (Update1) By Rich Miller and Simon Kennedy Oct. 9 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson are discovering both the leeway and limits they have as policy makers as they struggle to combat the 14-month-old credit crisis. The two have worked to come up with novel strategies, including a complex plan for the Fed to backstop the everyday finances of corporate America by buying commercial paper, and potential injections of capital into banks. So far, they've made scant progress in restoring calm to the markets and are turning abroad for help, including joint interest-rate cuts yesterday. ``The relative position of the U.S. in the world economy and the world of finance is much lower than it used to be,'' said Allen Sinai, chief economist at Decision Economics in New York. ``With markets so global, so interconnected, we need a more unified approach to fighting the world financial crisis.'' Which proves more important in the end -- the continued creativity of Bernanke and Paulson in fashioning policies to tackle the turmoil or the intractability of the now global crisis facing them -- will go a long way in determining whether a developing global recession turns into something even worse. Even as Paulson reached across borders, he played down the likelihood of the U.S. backing a U.K. proposal to extend guarantees to loans between banks. The Treasury chief told reporters yesterday that it might ``not make sense to have identical policies'' because each countries' circumstances are different. Worldwide Cuts Along with the Fed's half-point reduction in its benchmark rate, central banks from the European Central Bank to the People's Bank of China lowered borrowing costs yesterday. The coordinated rate cuts may presage a period in which foreign central bankers and finance ministers take up more of the burden of combating a crisis that Bernanke and Paulson are finding hard to contain on their own. Policy makers from the Group of Seven industrial nations -- Britain, Canada, France, Germany, Italy, Japan and the U.S. -- meet tomorrow, and how to handle the turmoil is at the top of their agenda. ``The G-7 governments are going to try all kinds of measures to try to get cross-border flows going to unleash locked-up credit markets,'' said Adam Posen, deputy director of the Peterson Institute for International Economics in Washington. Likely steps include further rate reductions in coming weeks and using taxpayer money to replenish capital at loss-ridden banks, with a slight chance of some nations extending guarantees to loans between them. One focus, according to Posen: attempting to find a way to get money moving from countries with record trade surpluses and currency reserves to countries where credit is scarce. `Keep Hitting' ``We should not underestimate the joint power of fully committed global policy makers -- markets will take notice and turn around,'' said Marco Annunziata, chief economist at Unicredit MIB in London. ``Policy makers must keep hitting the markets with decisive measures in the coming days.'' U.S. action so far is unprecedented in scale since the Great Depression. In the past five weeks alone, the government has taken over mortgage-finance firms Fannie Mae and Freddie Mac, rescued insurer American International Group Inc., backed the deposits of money-market funds and authorized a $700 billion bank rescue program. In putting together those measures, policy makers stretched the limits of what they can do under the law. The Fed has repeatedly invoked emergency powers only available to it at times of ``unusual and exigent circumstances'' to extend credit of up to $123.8 billion to AIG and set up its commercial-paper program. `All' Tools And U.S. policy makers aren't finished yet. Paulson yesterday signaled he's considering pumping capital into U.S. financial institutions, saying ``we will use all of the tools we've been given to maximum effectiveness'' under the $700 billion Troubled Asset Relief Program. Barclays Capital Inc., Macroeconomic Advisers LLC and other forecasters predict the Fed will cut rates by another half-point this month to 1 percent. That would match the lowest level in five decades. ``Policy makers want to get as much stimulus into the system as soon as possible,'' said Brian Sack, a former Fed economist now at Macroeconomic Advisers in Washington. Yet for all these efforts, investors remain unnerved and financial markets are in turmoil. U.S. stock indexes fell for a sixth day yesterday, plummeting 16 percent in that period. Fear Grips Markets Behind the panic: fear that Bernanke and Paulson have yet to get ahead of a problem that's now morphed from a U.S. housing recession into a global financial meltdown. To finally beat the crisis, policy makers outside the U.S. may have to show the same flexibility as their U.S. counterparts. The markets were unnerved earlier this week after a summit of European leaders concluded without a comprehensive, cross-border remedy for their banks' deepening woes, forcing countries to go it alone. The U.K. yesterday granted Britain's banks an unprecedented 50-billion-pound ($86 billion) lifeline and emergency loans from the central bank. ``It's going to take a while to work through this problem,'' Paulson said yesterday. ``Some financial institutions will fail'' even after the U.S. actions, he said. http://www.bloomberg.com/apps/news?...id=awcwOBcGPWeA |
Economics truly is the dismal science.
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| Originally posted by josh4 So what you're saying is its possible this is all Bush's fault. |
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| Originally posted by Shakka Are you saying that it's possible that you are retarded and ill-informed? |
If you want an apology, then I apologize. I wouldn't want to offend retarded people anyway. However I find it a bit egotistical to call them "nice gems" as it's for the audience to decide. Frankly, I'm just a bit tired of your overly partisan approach to many matters of a non-partisan nature. I think I've made that abundantly clear, but you've continued to do it nonetheless. I'd appreciate a bit more tact from you, but feel free to go ahead framing things the way you like if it makes you feel more righter.
But perhaps I did sink a bit too low in suggesting you might be cerebrally deficient. And for that I'll have to beg the church not to punish me too severely.
I agree with Josh on most issues, but I agree with Shakka on this one. You're just doing the same thing Pelosi did with last Monday's speech.
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| Originally posted by Shakka Yes, and subprime was a small, manageable, ring-fenced problem...I heard Iceland compared to essentially a large, over-leveraged hedge fund this morning. It's just a microcosm of what's been going on. |
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| Originally posted by josh4 I would be very worried about a whole country going bankrupt and collapsing financially. I think what occrider said is Iceland is an example of what is happening around the world. The fact it is a small country isn't grounds for dismissal. It's failed first because it is small. It makes sense that in a global financial crisis like this the smaller economies will topple first and those effects will reverberate upwards. |
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| Originally posted by jerZ07002 i'm not sure if you were trying to make a comparison between subprime lending and iceland's potential bankruptcy. In any case, the two issues are entirely different because the loss of value on CDOs associated with subprime mortgages reduced the borrowing capabilities of companies (much larger than iceland) and led to mistrust between consumers and banks. I don't see the same risks with iceland's bankruptcy (although i could be wrong). If iceland goes bankrupt how does that effect the financial system other than the fact that another player (much smaller than bear or lehman) went down? |
1:12 leverage is far too much for a country to take on. No wonder they're going bankrupt. The most a country should be able to leverage is 1:2, in my opinion.
Hmm It looks like the bailout package has worked?
I dont know about that
we truly have a global economic crisis that will only continue to deteriorate until assets can be accurately appraised for their value, worldwide confidence in the economy is restored and when the U.S. finally gets its act together in cooperation with other foreign countries to come up with a way to eliminate the national debt or at least signal a decrease in deficit spending
if the fed takes over the banks in the U.S. just like the icelandic government has (which was hinted at on CNN although I take every word uttered by the corporate media with a grain of salt) it might be good for confidence but ultimately that means that every bank is in some part being influenced and controlled to some extent by the lender of last resort
You are right krypton the federal reserve system is not backed by nothing but I am not sure if the Bretton Woods System is enduring the massive credit crunch with very much success
Hopefully some really bright economic minds will analyze this collapse, learn from it an establish a more refined system in which the world does not rely on the IMF as the lender of last resort because I am not comfortable with a central world bank....I have my doubts
Here is a reply to someone who doubted my initial assertion that the current bailout is a failure and that timeliness was not its only shortcoming
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Originally posted by Lebezniatnikov
Are you insane? Voters may not have been happy with the bailout as crafted, but you can bet they're savvy enough to understand that something needed to happen. Even the most free market of economists are criticizing Congress for taking TOO LONG to pass the package - failure to do anything (as you seem to advocate) would be absolutely insane.
I am not insane ok here are the facts because I have been criticized for not sourcing material and providing backing to my arguments. Why the bailout plan regardless of how soon it was passed is a failure
1. The moment the bailout was passed the Dow jones was up 150 dollars by the end of the day it was down about 250 a 400 point loss in the Dow Jones which has only continued to plummet since the time the bailout has passed clearly the market made its verdict on how successful the bailout was!
And as far as not being timely enough to save the markets take a look at the letter sent by 231 top economists warning about the bailout sent to congress
http://faculty.chicagogsb.edu/john....age_protest.htm
.............(This letter was sent to Congress on Wed Sept 24 2008 regarding the Treasury plan as outlined on that date. It does not reflect all signatories views on subesquent plans or modifications of the bill)
To the Speaker of the House of Representatives and the President pro tempore of the Senate:
As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:
1) Its fairness. The plan is a subsidy to investors at taxpayers� expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.
2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.
3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.
For these reasons WE ASK CONGRESS NOT TO RUSH, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come."
WELL IT LOOKS LIKE MANY ECONOMISTS WITH MORE KNOWLEDGE THAN BOTH OF US COMBINED THOUGHT THAT A QUICK BAILOUT PASSAGE WAS NOT THE SOLUTION AND SPECIFICALLY REQUESTED CONGRESS NOT TO RUSH? SO THE TIMELINESS ARGUMENT IS SOMEWHAT VALID IN THAT BUSH PROPOSED AN ABSURD PROPOSAL AND RELIED ON FEAR-MONGERING (like he did to win the white house in 2004) HOPING IT WOULD GET PASSED BUT THE ABSURDITY OF THAT BILL COULD NOT BE RATIONALLY PASSED AND IF THEY GOT IT WRONG IT COULD HAVE BEEN MORE DEVASTATING THAN IF NO BAILOUT HAPPENED AT ALL IN FACT IT WOULD HAVE BEEN MUCH WORSE
as you can see below look at these names, the number of them, the nobel laureates involved? does that spell credibility to you?
Signed (updated at 9/27/2008 6:00PM CT)
Acemoglu Daron (Massachussets Institute of Technology)
Ackerberg Daniel (UCLA)
Adler Michael (Columbia University)
Admati Anat R. (Stanford University)
Ales Laurence (Carnegie Mellon University)
Alexis Marcus (Northwestern University)
Alvarez Fernando (University of Chicago)
Andersen Torben (Northwestern University)
Baliga Sandeep (Northwestern University)
Banerjee Abhijit V. (Massachussets Institute of Technology)
Barankay Iwan (University of Pennsylvania)
Barry Brian (University of Chicago)
Bartkus James R. (Xavier University of Louisiana)
Becker Charles M. (Duke University)
Becker Robert A. (Indiana University)
Beim David (Columbia University)
Berk Jonathan (Stanford University)
Bisin Alberto (New York University)
Bittlingmayer George (University of Kansas)
Blank Emily (Howard University)
Boldrin Michele (Washington University)
Bollinger, Christopher R. (University of Kentucky)
Bossi, Luca (University of Miami)
Brooks Taggert J. (University of Wisconsin)
Brynjolfsson Erik (Massachusetts Institute of Technology)
Buera Francisco J.(UCLA)
Cabral Luis (New York University)
Camp Mary Elizabeth (Indiana University)
Carmel Jonathan (University of Michigan)
Carroll Christopher (Johns Hopkins University)
Cassar Gavin (University of Pennsylvania)
Chaney Thomas (University of Chicago)
Chari Varadarajan V. (University of Minnesota)
Chauvin Keith W. (University of Kansas)
Chintagunta Pradeep K. (University of Chicago)
Christiano Lawrence J. (Northwestern University)
Clementi, Gian Luca (New York University)
Cochrane John (University of Chicago)
Coleman John (Duke University)
Constantinides George M. (University of Chicago)
Cooley, Thomas (New York University)
Crain Robert (UC Berkeley)
Culp Christopher (University of Chicago)
Da Zhi (University of Notre Dame)
Darity, William (Duke University)
Davis Morris (University of Wisconsin)
De Marzo Peter (Stanford University)
Dub� Jean-Pierre H. (University of Chicago)
Edlin Aaron (UC Berkeley)
Eichenbaum Martin (Northwestern University)
Ely Jeffrey (Northwestern University)
Eraslan H�lya K. K.(Johns Hopkins University)
Fair Ray (Yale University)
Faulhaber Gerald (University of Pennsylvania)
Feldmann Sven (University of Melbourne)
Fernandez, Raquel (New York University)
Fernandez-Villaverde Jesus (University of Pennsylvania)
Fohlin Caroline (Johns Hopkins University)
Fox Jeremy T. (University of Chicago)
Frank Murray Z.(University of Minnesota)
Frenzen Jonathan (University of Chicago)
Fuchs William (University of Chicago)
Fudenberg Drew (Harvard University)
Gabaix Xavier (New York University)
Gao Paul (Notre Dame University)
Garicano Luis (University of Chicago)
Gerakos Joseph J. (University of Chicago)
Gibbs Michael (University of Chicago)
Glomm Gerhard (Indiana University)
Goettler Ron (University of Chicago)
Goldin Claudia (Harvard University)
Gordon Robert J. (Northwestern University)
Greenstone Michael (Massachusetts Institute of Technology)
Gregory, Karl D. (Oakland University)
Guadalupe Maria (Columbia University)
Guerrieri Veronica (University of Chicago)
Hagerty Kathleen (Northwestern University)
Hamada Robert S. (University of Chicago)
Hansen Lars (University of Chicago)
Harris Milton (University of Chicago)
Hart Oliver (Harvard University)
Hazlett Thomas W. (George Mason University)
Heaton John (University of Chicago)
Heckman James (University of Chicago - Nobel Laureate)
Henderson David R. (Hoover Institution)
Henisz, Witold (University of Pennsylvania)
Hertzberg Andrew (Columbia University)
Hite Gailen (Columbia University)
Hitsch G�nter J. (University of Chicago)
Hodrick Robert J. (Columbia University)
Hollifield Burton (Carnegie Mellon University)
Hopenhayn Hugo (UCLA)
Hurst Erik (University of Chicago)
Imrohoroglu Ayse (University of Southern California)
Isakson Hans (University of Northern Iowa)
Israel Ronen (London Business School)
Jaffee Dwight M. (UC Berkeley)
Jagannathan Ravi (Northwestern University)
Jenter Dirk (Stanford University)
Jones Charles M. (Columbia Business School)
Jovanovic Boyan (New York University)
Kaboski Joseph P. (Ohio State University)
Kahn Matthew (UCLA)
Kaplan Ethan (Stockholm University)
Karaivanov Alexander (Simon Fraser University)
Karolyi, Andrew (Ohio State University)
Kashyap Anil (University of Chicago)
Keim Donald B (University of Pennsylvania)
Ketkar Suhas L (Vanderbilt University)
Kiesling Lynne (Northwestern University)
Klenow Pete (Stanford University)
Koch Paul (University of Kansas)
Kocherlakota Narayana (University of Minnesota)
Koijen Ralph S.J. (University of Chicago)
Kondo Jiro (Northwestern University)
Korteweg Arthur (Stanford University)
Kortum Samuel (University of Chicago)
Krueger Dirk (University of Pennsylvania)
Ledesma Patricia (Northwestern University)
Lee Lung-fei (Ohio State University)
Leeper Eric M. (Indiana University)
Letson David (University of Miami)
Leuz Christian (University of Chicago)
Levine David I.(UC Berkeley)
Levine David K.(Washington University)
Levy David M. (George Mason University)
Linnainmaa Juhani (University of Chicago)
Lucas Robert (University of Chicago - Nobel Laureate)
Ludvigson, Sydney C. (New York University)
Luttmer Erzo G.J. (University of Minnesota)
Manski Charles F. (Northwestern University)
Martin Ian (Stanford University)
Mayer Christopher (Columbia University)
Mazzeo Michael (Northwestern University)
McDonald Robert (Northwestern University)
Meadow Scott F. (University of Chicago)
Meeropol, Michael (Western New England College)
Mehra Rajnish (UC Santa Barbara)
Mian Atif (University of Chicago)
Middlebrook Art (University of Chicago)
Miguel Edward (UC Berkeley)
Miravete Eugenio J. (University of Texas at Austin)
Miron Jeffrey (Harvard University)
Moeller, Thomas (Texas Christian University)
Moretti Enrico (UC Berkeley)
Moriguchi Chiaki (Northwestern University)
Moro Andrea (Vanderbilt University)
Morse Adair (University of Chicago)
Mortensen Dale T. (Northwestern University)
Mortimer Julie Holland (Harvard University)
Moskowitz, Tobias J. (University of Chicago)
Munger Michael C. (Duke University)
Muralidharan Karthik (UC San Diego)
Nair Harikesh (Stanford University)
Nanda Dhananjay (University of Miami)
Nevo Aviv (Northwestern University)
Ohanian Lee (UCLA)
Pagliari Joseph (University of Chicago)
Papanikolaou Dimitris (Northwestern University)
Parker Jonathan (Northwestern University)
Paul Evans (Ohio State University)
Pearce David (New York University)
Pejovich Svetozar (Steve) (Texas A&M University)
Peltzman Sam (University of Chicago)
Perri Fabrizio (University of Minnesota)
Phelan Christopher (University of Minnesota)
Piazzesi Monika (Stanford University)
Pippenger, Michael K. (University of Alaska)
Piskorski Tomasz (Columbia University)
Platt Brennan C. (Brigham Young University)
Rampini Adriano (Duke University)
Ray, Debraj (New York University)
Reagan Patricia (Ohio State University)
Reich Michael (UC Berkeley)
Reuben Ernesto (Northwestern University)
Rizzo, Mario (New York University)
Roberts Michael (University of Pennsylvania)
Robinson David (Duke University)
Rogers Michele (Northwestern University)
Rotella Elyce (Indiana University)
Roussanov Nikolai (University of Pennsylvania)
Routledge Bryan R. (Carnegie Mellon University)
Ruud Paul (Vassar College)
Safford Sean (University of Chicago)
Samaniego Roberto (George Washington University)
Sandbu Martin E. (University of Pennsylvania)
Sapienza Paola (Northwestern University)
Savor Pavel (University of Pennsylvania)
Schaniel William C. (University of West Georgia)
Scharfstein David (Harvard University)
Seim Katja (University of Pennsylvania)
Seru Amit (University of Chicago)
Shang-Jin Wei (Columbia University)
Shimer Robert (University of Chicago)
Shore Stephen H. (Johns Hopkins University)
Siegel Ron (Northwestern University)
Smith David C. (University of Virginia)
Smith Vernon L.(Chapman University- Nobel Laureate)
Sorensen Morten (Columbia University)
Spatt Chester (Carnegie Mellon University)
Spear Stephen (Carnegie Mellon University)
Stevenson Betsey (University of Pennsylvania)
Stokey Nancy (University of Chicago)
Strahan Philip (Boston College)
Strebulaev Ilya (Stanford University)
Sufi Amir (University of Chicago)
Tabarrok Alex (George Mason University)
Taylor Alan M. (UC Davis)
Thompson Tim (Northwestern University)
Troske Kenneth (University of Kentucky)
Tschoegl Adrian E. (University of Pennsylvania)
Uhlig Harald (University of Chicago)
Ulrich, Maxim (Columbia University)
Van Buskirk Andrew (University of Chicago)
Vargas Hernan (University of Phoenix)
Veronesi Pietro (University of Chicago)
Vissing-Jorgensen Annette (Northwestern University)
Wacziarg Romain (UCLA)
Walker Douglas O. (Regent University)
Walker, Todd (Indiana University)
Weill Pierre-Olivier (UCLA)
Williamson Samuel H. (Miami University)
Witte Mark (Northwestern University)
Wolfenzon, Daniel (Columbia University)
Wolfers Justin (University of Pennsylvania)
Woutersen Tiemen (Johns Hopkins University)
Wu Yangru (Rutgers University)
Yue Vivian Z. (New York University)
Zingales Luigi (University of Chicago)
Zitzewitz Eric (Dartmouth College)
OF COURSE THERE WAS A MODIFIED BAILOUT PLAN BUT IT FAILED BECAUSE IT ONLY ADDRESSED 5-10% OF US ASSETS AND DID NOT ALLAY CONCERNS NOR EXPEDITE THE PROCESS OF DELIVERING THE MONEY TO ESSENTIALLY ARTIFICIALLY SOLVENT INSTITUTIONS.
3. BUT More than a week before the 775 point drop on the dow last monday occured an insider had this to say about the current situation the same day congress was briefed about the crisis
READ THIS QUOTE FOR IT WILL TELL YOU MUCH ABOUT THE SCOPE OF THE PROBLEM WE FACE
Quote from http://market-ticker.denninger.net/...Government.html
Now understand that there is no solution to this fast and vicious destruction of America's financial markets and financial companies until and unless the lying stops.
It has NOT stopped and in fact has gotten materially worse.
Folks, this meltdown will not stop until either:
* ALL financials mark everything to the market, ALL OTC derivatives are traded on an exchange or declared void, and ALL balance sheets are transparent so we can determine who is broke and who is not.
OR
* The market has completely imploded with every financial stock worth zero as the hedge funds and others short each in turn into the ground, forcing each to be bailed out in turn.
Those are the ONLY TWO CHOICES.
Nothing else HAS WORKED and nothing else WILL WORK. With each bailout you simply give people another target and a new way to kill the next company in line. This process will proceed from firm to firm until NONE ARE LEFT and credit availability in the economy is ZERO.
The Fed has expended more than half of their balance sheet, in excess of four hundred billion dollars. It has not stopped the cascade.
The Government has spent nearly a trillion dollars we do not have in bailouts and other miscellaneous nonsense. It has not stopped the cascade.
Indeed, all that has happened is that the velocity of the crash has accelerated dramatically.
There is NO WAY to fix this through adding "more liquidity" - the problem IS AND HAS BEEN THE LIQUIDITY in that this allows BANKRUPT companies to continue to operate and LIE instead of forcing them into the open where they can be liquidated under Chapter 11.
We are here precisely because of the intentional provision of far TOO MUCH liquidity by Alan Greenspan and now by Ben Bernanke.
You cannot solve someone's drinking problem by giving them another bottle of whiskey!
THE LIQUIDITY SWAMP MUST BE DRAINED.
We cannot have a "financial system" that is based on fraud and theft. We cannot have "financial institutions" that claim to be solvent when they in fact are not unless they are able to make up values that are much higher than the REAL value for their so-called "assets".
Wayne Angell was on "Fast Money" tonight claiming that the balance sheet of The Fed is "infinite" and that "they can't be downgraded."
Wayne, you need to be charged with treason for spewing that crap on national television.
Sure, "in theory" The Fed's balance sheet is infinite - they can coordinate with Treasury to print as much money as they want.
So was Weimar Germany's.
The word for what Wayne was promoting on Fast Money this evening is HYPERINFLATION where you find that a wheelbarrow is worth more than all the $100 bills you can stuff into it.
Does anyone remember how hyperinflation worked out for them? I seem to remember a gentlemen with the first name of "Adolf" that the world got out of that little exercise of an "infinite balance sheet."
Why does this path inevitably lead to political failure? Because as soon as lenders discern that this is occurring they shut off credit entirely.
Think about it - you have $1,000 to lend out. You detect that the government is printing and intentionally devaluing your money. If you lend it out at 10% interest but the government is hyperinflating at 100% a year, you lose about half of the money's value every year! So if you lend me that $1,000 when I pay you back you can only buy half as much as you could before! For obvious reasons you're not going to allow that - you will instead immediately spend your $1,000 on something of physical value such as land before it can be debased.
Hyperinflation kills all credit availability instantly for this reason and any credit-based economy immediately implodes. This results in enormous and immediate mass unemployment and a resulting rupture of the social and political fabric of a nation.
As for not being able to be downgraded, you obviously didn't hear S&P today, which stated quite clearly that the United States "AAA" credit rating is not a right and must be earned. Can't be downgraded eh? Oh yes The Fed can be - along with everything else.
Folks, we require over $2 billion a day in foreign investment in order to pay our bills.
This is what came out from China today:
"BEIJING, Sept 17 (Reuters) - Threatened by a "financial tsunami," the world must consider building a financial order no longer dependent on the United States, a leading Chinese state newspaper said on Wednesday.
"The eruption of the U.S. sub-prime crisis has exposed massive loopholes in the United States' financial oversight and supervision," writes the commentator, Shi Jianxun.
"The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States."
"Infinite Balance Sheet" eh? See what foreign governments think of that sort of garbage?
Please understand - if foreign governments withdraw their support of our government funding via either scaling back their Treasury purchases or outright refusal to buy (or worse, they dump them on the market into this "fear spike" we're seeing now), we are absolutely and instantaneously screwed.
Michael Bloomberg, one of the few intelligent commentators out there (and a billionaire by his own hand) said exactly the same thing today:
"WASHINGTON (AP) � New York Mayor Michael Bloomberg is warning a 'next wave' of financial pain may come when foreign entities stop buying U.S. debt.
The billionaire mayor is speaking to an audience at Georgetown University, telling them it's not clear who is going to continue buying U.S. debt as financial firms try to cope with a crisis of confidence on Wall Street."
Mr. Bloomberg sees the same thing I do, but he's a bit more polite than I am about it.
Then there was S&P which made this quite clear as well:
"The $85 billion bailout of AIG on Tuesday by the U.S. Federal Reserve "has weakened the fiscal profile of the United States," S&P's John Chambers told Reuters in an interview.
"Lack of a pro-active stance could have resulted in further financial stress and put pressure on the U.S. triple-A rating," Chambers said. "There's no God-given gift of a AAA rating, and the U.S. has to earn it like everyone else."
Is that clear enough?""
IT SHOULD BE CLEAR IF YOU LOOK AT THE STATE OF THE CREDIT CRISIS RIGHT NOW THE OPINIONS OF THE MOST ACCOMPLISHED ECONOMISTS IN THE WORLD ARE AGAINST THE BAILOUT FOR ITS LONG TERM IMPACT
WE HAVE A 10.6 Trillion Dollar Debt according to wikipedia According to Barack Obama we have a 10 Trillion Dollar Debt According to Ron Paul WHO I TRUST THE MOST WE HAVE AN 11.3 Trillion Dollar Debt
THIS BAILOUT WILL NOT HELP THE DEBT CRISIS AND IN THE LONG TERM THE LONG AUCTION PROCESS INVOLVED WILL TAKE WEEKS IF NOT MONTHS TO FULLY TAKE EFFECT BECAUSE THE BAIL OUT PASSED IS A FAILURE
IF WE PASS MORE BAILOUTS LIKE WE DID TODAY WITH AIG GUESS WHAT??? EITHER OUR NATIONAL DEBT CONTINUES TO GO UP ILLIQUIDITY RISES AND CONFIDENCE IN THE U.S. DOLLAR FAILS THUS INFLATION GOES UP!
DOLLAR VALUE IS DESTROYED AND THUS A BREAKDOWN IN THE BRETTON WOODS AGREEMENT WILL OCCUR>>>>>>>>>> IF THE GOVERNMENT DOESN'T IMMEDIATELY ADDRESS THE CONFIDENCE ISSUE, NOT BY BAILING OUT COMPANIES OR SEIZING BANKS, BUT BY CUTTING SPENDING AND RAISING REVENUE VIA SOME FORM OF TAXATION (GROWING AND TAXING MARIJUANA WOULD EMPLOY MANY PEOPLE IF IT WERE DECRIMINALIZED IT IS LESS HARMFUL THAN ALCOHOL AND THE GOVERNMENT COULD REAP MASSIVE PROFITS BY TAXING IT HEAVILY) TO THE EXTENT THAT THERE IS A TREND TOWARD AN ANNUAL FISCAL SURPLUS ASAP
..............MY ADVICE LOOK INTO THE ETF MARKET DIVERSIFY YOUR PORTFOLIO and BUY COMMODITIES LIKE GOLD (The ultimate hedge against inflation) to safeguard your portfolio do not touch the stocks you are confident will benefit from this in the long term but sell those that people have no confidence in (I.E. General Motors) FOREX MARKETS ARE RIPE WITH OPPORTUNITY RIGHT NOW!.............
| quote: |
| Originally posted by Shakka Not at all. I was pointing out the potential fallacy of suggesting that because Iceland is a small country that the dangers and signals its bankruptcy may signal are insignificant...much like the people who laughed in late '06/early '07 when subprime mortgage loans began to default at an alarming rate suggested that subprime was a tiny, insignificant corridor of the market and that any problems associated with it were ring-fenced and contained. Those guys sure proved to know what they were talking about! If nothing else, I hope we've learned to take events like this VERY seriously when they occur as it could be a canary in a coal mine. Also, shouldn't it always be a bit concerning when an entire country goes bankrupt? Especially one with hot chicks like Iceland? |
| quote: |
| Originally posted by jerZ07002 i agree it may signal a some underlying weaknesses, however, as i said before, I think Iceland is entirely unique. They are highly leveraged and have little to no production capabilities. Almost their entire economy was built on foreign debt (as opposed to domestic production). I wasn't suggesting that because it is small it is not a big deal. I prefaced the comments in my original post with the statement about Icelands lack of domestic production capabilities. |
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